ISuppli Warns of Looming DRAM Shortage

A shortage of the main memory chips used in personal computers could send prices of the chips higher in the second half of this year, market researcher iSuppli warned on Monday

DRAM makers face two supply problems currently, an inability to obtain needed production equipment and tricky work implementing advanced new technology, iSuppli noted.

A DRAM shortage would spell trouble for the global computer market. At a time when personal computer shipments are soaring - at a 22.4 percent year-on-year clip in the second quarter according to IDC - DRAM makers are still trying to recover from the downturn last year.

Many companies did not have enough money to buy new equipment last year, so they've inundated equipment vendors with orders this year. The key to success in DRAM is making as many chips as fast and as small as possible. New equipment is needed every year and workers face a learning curve to yield as many chips per silicon wafer as possible.

The threat to consumers is in the potential for PC prices to rise. Most DRAM go into PCs and servers. The chips are vital to storing data as it's being used, which affects computer speed and operation. A problem with DRAM supplies could force PC prices higher because vendors would have to pay more for the chips.

Tight supplies of a number of PC components have already sent PC prices up for the first time in five years this year, according to Acer, one of the world's biggest PC vendors. Higher DRAM prices have been one culprit of the rise in PC prices.

iSuppli did not forecast how high DRAM prices might go if the supply problems surface.

The main DRAM manufacturing tool chip makers lack right now is immersion lithography equipment, which iSuppli believes will be in short supply this year. Companies that make the vital equipment will not be able to produce enough machines to meet industry needs, the market researcher said, and only a few DRAM makers already have the gear they need.

The second trouble is in chip yields. DRAM makers constantly work to make chips smaller so they can yield more chips from each silicon wafer. The technology to get ahead in DRAM takes time to master and a number of companies have run into problems because the technology is more difficult to implement as it gets smaller. Currently, DRAM makers face problems using sub-50-nanometer technology, iSuppli said, naming only a few chip makers have successfully made the transition to the latest technology.

The three DRAM makers in the best position to benefit from rising chip prices are Samsung Electronics, Hynix Semiconductor and Micron Technology, iSuppli said, because they've already upgraded to the latest technology.

Samsung maintained its lead in DRAM during the second quarter with a 35.3 percent share of industry revenue, according to a preliminary report from Gartner published Sunday, followed by Hynix with 20.9 percent, Elpida Memory with 17.3 percent, Micron with 13.3 percent and Nanya Technology with 4.4 percent.

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